How to Make a Taxpayer-Initiated Disclosure

Overview

A person that does not qualify under the Voluntary Disclosure legislation may be eligible for a penalty waiver as outlined in RAB 2005-03, Penalty Provisions. This program allows a person to voluntarily disclose a tax deficiency without imposition of penalties by the Department. Limitations to the lookback period are not allowed under this program.

Qualification Requirements

Except as applied to estimated tax returns, taxpayer-initiated disclosure means any voluntary disclosure of a tax deficiency when there has been no prior contact by the department.

No penalty will be applied to tax deficiencies on amended returns, providing:

  1. There has been no contact by the department,
  2. The taxpayer is not under investigation by the department for the tax period involved, and
  3. The taxpayer or agent pays the tax deficiency and interest without further action by the department.

No penalty will be applied to tax deficiencies paid with the filing of a delinquent return providing:

  1. There has been no contact by the department,
  2. The taxpayer is not under investigation by the department,
  3. The tax period of the return(s) includes the taxpayer's first filing period for that tax, and
  4. The taxpayer or agent pays the tax deficiency and interest without further action by the department.

A Taxpayer is required to file a written request or statement to be considered for the taxpayer-initiated disclosure exception from penalty.

How to Make a Taxpayer-Initiated Disclosure

Complete and submit all of the following:

  1. A letter that includes contact information (i.e. name, mailing address, phone number, and email address) and attests to the appropriate conditions identified above.
  2. The appropriate tax returns or worksheets.
    1. If the disclosure is for Michigan Business Tax, Corporate Income Tax, Individual Income Tax, or Composite Individual Income Tax, tax returns must be completed and submitted for all years. Composite returns will require copies of federal returns.
    2. If the disclosure is for sales, use or withholding tax;
      1. For disclosures that encompass periods before and after January 1, 2015, follow both sets of filing instructions.
      2. Before- For periods prior to January 1, 2015 a submit a worksheet. If reporting sales or use tax, the worksheet must include taxable sales, tax  and interest amounts. Payment of tax and interest is required. To compute interest, use our online Penalty and Interest Calculator, disregard the penalty.
        1. If the tax being remitted was not previously collected, complete the worksheet on a quarterly basis. Compute interest from the 20th day of the month following the quarter, to the present date.
        2. If sales or use tax was collected from the purchaser, or withholding taxes withheld from employee wages, the amounts must be reported on a monthly basis. Compute interest from the 20th day of the following month to the present date.
      3. After- For periods beginning on or after January 1, 2015, quarterly/monthly and annual returns should be filed online using Michigan Treasury Online (MTO). Payment of tax and interest is required. To compute interest, use our online Penalty and Interest Calculator, disregard the penalty. If a current filer, the filing frequency must match that of prior filings of that tax type or other tax type(s) being filed (sales, use or withholding). Contact Discovery at 517-636-4120 before filing via MTO.

Payment of tax and interest is required. To compute interest, use our online Penalty and Interest Calculator, disregard the penalty.

Remit the full amount of tax and interest due along with a check payable to the State of Michigan and/or separate payments made via MTO. Mail the letter, returns/worksheets and payment to the

Discovery and Tax Enforcement Division
P.O. Box 30140
Lansing, MI 48909 

The Discovery and Tax Enforcement Division will send a notice acknowledging reciept of returns/worksheets and payments.

More Information

The Corporate Income Tax (CIT) is effective as of January 1, 2012. The CIT replaces the Michigan Business Tax (MBT); however, MBT taxpayers who have received or been assigned certain certificated credits may elect to continue to file under the MBT rather than the CIT in order to claim such credits.

Flow-through entities (excluding trusts) reasonably expected to accrue more than $200,000 of business income may be required to withhold Michigan income tax at the corporate income tax rate on the distributive share of the business income of any member that is a corporation or another flow-through entity. For more information on withholding requirements, please see the "Withholding" section of this website.

View additional details on the Corporate Income Tax here.

If you would like additional information regarding the voluntary disclosure program or the taxpayer-initiated disclosure program, contact the Discovery and Tax Enforcement Division at P.O. Box 30140, Lansing, MI 48909, or call 517-636-4120.